Market Segmentation in Hospitality Research

Market segmentation as a term came up to describe the concept that all customers are not alike. Because in hospitality industry marketing money and resources are limited, it has to concentrate on specific groups of people, or target market, to avoid waste in time, money and quality. As a result, it’s ensuring the highest returns. [1 pp19] The reasons why segmentation is so important for hospitality industry are – more successful use of marketing money, clearer perceptive of the needs and wants of special customer groups, more effective developing of service, greater correctness in selecting promotional vehicles and techniques. [1 pp173]

The external environment of the hotel industry in is very competitive and already well established. Trends in the market include promotional campaigns to customers using the "more bang for your buck," method. There are several different segments of the hotel industry including: luxury, upscale, mid-market with food and beverage, mid-market without food and beverage, economy, and budget. Each different segment offers certain amenities to appeal to consumers depending on what they are looking for in an over night stay away from home. As McDonald 's looks at entering the hotel industry they have looked at several important

In regards to a customer profile those aged between 26-35 years old with children, an income between $22,500 to $75,000 would attend under 5 or 2 games per year. They would not necessarily be a baseball fan but are looking for family entertainment. This gives an understanding to motives behind why this market is attending and how to create a market strategy to their ideals.

According to Horner and Swarbrooke (2005: 39), Segmentation may be defined as the process of dividing a whole market into subgroups or segments for marketing management purposes. Market segmentation is the division of the overall market for a service into various categories with common characteristics. In response to different segments, organisations facilitate the available resources to achieve greater efficiency, in order to satisfy specific needs of customers.

In order to market the product into the market successfully, marketers need to have some marketing strategy to enter the desired market and make profit. Market segmentation is the process of dividing a market into subsets of consumers with common needs or characteristics (Schiffman et al., 2011). Understanding the market size and segmentation is valuable, but the keys to effective targeting is to know just how valuable specific consumer groups are, and being able to quantify the impact of consumer trends ( Berry, 1999).

Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs and applications

1. Think about size, growth, locational aspects and segmentation 2. Market Structure 3. Performance metrics used 4. Trends

targeted those people who would recognize and appreciate quality lodging and not those who were seeking “cheap sleep”.  Inviting potential guests or individuals who might influence visitor hotel selection to launch parties, swim parties, cocktail parties and other planned events.  Targeting supportive hospitality businesses.  Packages that supported local businesses were developed.

As every customer has unique needs and expectations towards certain products, the ultimate goal of market segmentation is to organize customers into groups which allows targeting of customers with similar needs of and response to the products. The key is to minimize differentiation within each segment

Using the geographic segmentation approach, they have divided the market into two segments rural and urban, of which they serve the urban. Behavioral segmentation divides the market according to attitudes, they have located themselves at strategic positions and provided ambience in the restaurant to satisfy different temperaments of people. In employing psychographic segmentation, they have divided the market on the basis of lifestyle preferences. In using price segmentation, they have divided the market in lines of luxury, economy, and value.

Submitted to the Graduate School of the University of Massachusetts Amherst in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE September 2008 Department of Hospitality and Tourism Management

The Ritz-Carlton Hotel Company operates within the upscale & luxury hotel industry. While it could be argued that Ritz-Carlton operates in the more broad and inclusive lodging industry, they offer a highly differentiated product and service and therefore find themselves operating in an exclusive industry alongside very few direct competitors, such as Four Seasons Hotels, HongKong and Shanghai Hotels, and Starwood Hotels & Resorts. Therefore when analyzing this industry I will not be including cheap hotels, motels, lodges, or inns, unless to offer potential substitutes to luxury hotels. In order to assess the attractiveness of the upscale & luxury hotel industry, an analysis of the general environment surrounding the industry must be

Market segmentation is an approach used by a company to select their target market and provide data for a marketing plan. “Market segmentation consist of a two-step process; naming broad product markets and segmenting these broad products-markets in order to select target markets and develop suitable marketing mixes” (Perreault, Cannon, & McCarthy, 2014, p.97). There are 4 categories pertaining to market segmentation; behavioral, geographic, demographic, and behavioral.

‘Market segmentation represents an effort to identify and catergorise groups of customers and countries according to common characteristics’ (Keegan and Green 2016, p.228). For any business, it is crucial that they segment their market accordingly or they will risk forgoing sales opportunities. Fahy and Jobber (2015) identify the objective of market segmentation as distinguishing groups of customers with similar requirements so

Essentially, the marketing manager will seek to understand how a competitive advantage may be gained over other competitors (Lemon et al 2002). Figure 1 shows that Hilton Hotel Corporation is one of the leading hotels in the world. Nevertheless, as a newer hotel in Melbourne, Hilton is facing some serious challenges from competitors such as Grand Hyatt Melbourne and Sheraton Melbourne. Grand Hyatt Melbourne has completed its four year refurbishment project. Meanwhile, Sheraton Melbourne Hotel will launch a new full service as part of a 2013 development, combining hotel services with up-market residences and boutique retail (Melbourne Planner’s Guide 2011-2012, 2011). It is critical for Melbourne Hilton Hotel to understand visitors’ wants in order to satisfy visitors. In addition, Melbourne Hilton Hotel needs to have a good understanding of the competition in